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What’s Next for Starbucks?

April 25, 2008

by
findingDulcinea Staff

Starbucks remains one of the most successful modern retail ventures this country has seen, but it’s also the target of many a coffee lover’s ire. With continual competition from the artisans of coffee and cheaper retailers, what lies down the road for Starbucks?

As the CEO of Starbucks in the 1990s, Howard Schultz helped turn the company into the largest coffee shop chain in the world. But he left his post in 2000, and during that hiatus his successor, Jim Donald, grew the number of Starbucks stores from 3,500 to 15,000. Many believe it happened too fast. In 2007, Schultz wrote an emotional Valentine’s Day memo to the company’s executives about Starbucks’ “loss of passion and romance for selling coffee.” Eleven months later, Schultz resumed his position as CEO, following in the footsteps of Steve Jobs, a former CEO of Apple, Inc. who also returned during a period of financial trouble.

Starbucks has extended its empire to 44 countries and to nearly every block of Manhattan, plus malls and small towns across America. Meanwhile, the company replaced manual with automatic espresso machines to save time, the more experienced managers and barista were too thinly spread out amongst the many stores, and, says the New York Times, “coffee can sit in Starbucks’s urns for as long as two hours.” Schultz plans to revitalize Starbucks with a return to better coffee, introducing new blends and higher quality espresso and coffee machines.

Why did Starbucks start a record label, sell food that few people buy and abandon the art of coffee-making? No one is entirely sure, but it was a pleasant surprise—to past and present employees, Starbucks drinkers and undoubtedly, the company executives—to see the “passion” of the company returning in the form of Schultz. Even self-proclaimed “coffee geeks” are watching the changes with interest. In a recent New York magazine article, three of them sounded off on what makes Starbucks weak and what can make it better. Among their often obvious suggestions: train the baristas better and don’t overroast the beans, a pervasive problem which has led many people to dub the coffee chain “Charbucks.”

The high-priced coffee at Starbucks may not currently be of the best quality, but many of those who require java don’t seem to care; after all, Starbucks is so conveniently located—or so you’d think. McDonald’s is poised to grab a piece of Starbucks’ coffee consumer base, and there are considerably more outposts of the burger chain than there are of Starbucks. Click over to Foodio54 to compare Starbucks with McDonald’s saturation in your area.

On the other side of the counter, many baristas are seeking changes that go beyond more training and better coffee machines: they want to make sure that they get what they’re owed. In March, a California court ruled that Starbucks must reimburse baristas the tips that they were previously required to share with shift supervisors. Similar cases are pending in Massachusetts and New York.

But not all baristas are unhappy; there’s the case of Michael Gates Gill, a downsized ad exec with a recently diagnosed brain tumor, who not only gained a paycheck but also became a better man when he took a job at Starbucks. His book “How Starbucks Saved My Life” chronicles his transformation.

John Moore, a former Starbucks employee and author of the blog “Brand Autopsy” wonders why Starbucks doesn’t make more of Michael Gill’s success story. Starbucks promotes random musicians and movies; why not promote the pleasures of working for the company?

In fact, Moore has given quite a bit of thought to “Solving Starbucks Problems.” Among the problems discussed: “Loss of Coffee Theatre” (the espresso machine dilemma), “Loss of Coffee Aroma,” (most stores now smell of a combination of melting plastic and toasted sandwiches) and “Loss of Store Soul” (ouch). Moore also wrote a detailed manifesto, “What Must Starbucks Do?” in response to Howard Schultz’s rather touching Valentine memo.

The return of Schultz is promising, but obviously Starbucks must overcome various challenges on the way to retaking its coffee crown. More coverage on Starbucks’ new leaf can be found in the Beyond the Headlines story “Starbucks: Out with the New, in with the Old.”